TIDMOPG
RNS Number : 2663Q
OPG Power Ventures plc
05 June 2018
5(th) June 2018
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for Q4, FY18
OPG (AIM: OPG), the developer and operator of power generation
plants in India, announces its trading update in respect of the
full year ended 31(st) March 2018 ("FY18").
Summary
-- 1.1 billion units in Q4 FY18, up 15% on Q4 FY17;
-- Total FY18 generation 4.8 billion units up 10% from 4.4 billion units in FY17;
-- FY18 Chennai plant load factor ("PLF") of 77% and 78% for Gujarat;
-- Sales tariffs increased by 4% at Chennai plant for FY19;
-- 62 MW Karnataka solar projects commissioned and expected to
contribute to Group earnings in FY19;
-- Gujarat Distribution Companies of the State Electricity Utility ("DISCOMs") no longer levying cross-subsidies to our customers; GBP7m of dues already recovered by the Group; and,
-- Strategic review of Gujarat plant underway following
successful resolution of group captive status with DISCOMs; 5%
equity interest in OPGS Gujarat ("OPGG") sold;
Arvind Gupta, Executive Chairman of OPG, commented:
"This has been a record year of production for OPG, in which we
have operated both our plants in line with our full year guidance.
Improvements in the tariffs at Chennai for FY19 have provided us
with some additional headroom for next year versus the prevailing
coal price which, albeit is still high, is lower than
recently."
"With the commissioning of 62 MW solar projects in Karnataka, we
now have a diversified portfolio of thermal and renewable assets
which is strategically important in the modern environment and a
key milestone for OPG. Following the resolution of the significant
issues to do with recovering historic cross subsidy deductions made
by Gujarat DISCOMs, the Board has decided to review its strategic
options for the Gujarat plant and remains focused on the Group
delivering strong operational and financial performance, to allow
the Group to deliver true value to stakeholders."
For further information, please visit www.opgpower.com or
contact:
+91 (0) 44 429
OPG Power Ventures PLC 11211
Arvind Gupta / Dmitri Tsvetkov
Cenkos Securities (Nominated Adviser +44 (0) 20 7397
& Broker) 8900
Stephen Keys / Camilla Hume
+44 (0) 20 7920
Tavistock (Financial PR) 3150
Simon Hudson / Barney Hayward / James
Collins
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 ('MAR')
Group Operations Summary
Q4 Q4 FY 18 FY17
FY18 FY17
------ -----
Generation (million kWh)
------ ----- ------ ------
414 MW Chennai 676 589 2,493 2,346
300 MW Gujarat 415 304 2,041 1,657
----------------------------- ------ ----- ------ ------
Generation (MU) including
auxiliary 1,091 893 4,534 4,003
------ ----- ------ ------
Additional "deemed" offtake
at Chennai 41 95 277 364
----------------------------- ------ ----- ------ ------
Total Generation (MUe)1 1,132 988 4,811 4,367
----------------------------- ------ ----- ------ ------
Reported Average PLF (%)2
------ ----- ------ ------
414 MW Chennai 82% 75% 77% 76%
------ ----- ------ ------
300 MW Gujarat 64% 47% 78% 63%
------ ----- ------ ------
Note:
1. MU - millions units or kWh; Mue - millions units or kWH of
equivalent power
2. Reported Average PLF based on Mue
Total generation in Q4 FY 18 was 15% higher than in Q4 FY17 and
10% higher in FY18 than in FY17.
Chennai - 6% more units generated in FY18
Chennai 414 MW Twelve months
ended
31st Mar 18 (FY18)
-------------------
Generation 2,493
-------------------
Additional "deemed" offtake with
fixed capacity charge 277
-------------------
Total Generation (including deemed)
(MUe) 2,770
-------------------
Average Tariff (Rs/kWh) 4.92(*)
-------------------
Clean Dark Spreads (Rs/kWh) 1.45
-------------------
Net Debt (GBP, million (at 90.8
INR/GBP FX rate)) 76
-------------------
(*) - The plant realised an average tariff of Rs5.02 which
equates to Rs4.92 net of self-generation tax of Rs 0.1 per unit
which is paid directly to the state by group captive customers and
will not be included in Company's tariffs and expenses in FY19
which was the case in FY18
Strong generation in the fourth quarter, with a load factor of
82%, meant that the Chennai plants' generation during FY18 was 6%
higher than in FY17. The Company expects FY19 PLF to be
approximately 80% to 85%, including "deemed" offtake at Chennai and
expect the average tariff for full FY19 to be around Rs5.10 per
unit. The "Clean Dark Spread", was Rs1.45 per kWh for Chennai in
FY18 (FY17: Rs2.63) or GBP17.00 (FY17: GBP30.03) on a GBP per MWh
basis in spite of the sharp increase in coal prices in FY18.
The Company is pleased to announce that it has negotiated a 4%
increase in sales tariffs at Chennai plant for FY19 and, since the
year end all of the Group Captive customers in Chennai have renewed
their three year contracts.
For FY19, we expect the Chennai plant to continue with its
diversified sales mix, contracting the majority of its generation
from 414 MW to Group Captive customers and the balance of 74 MW
(net) to Tamil Nadu Generation and Distribution Corporation Limited
("TANGEDCO") under the 15 year Power Purchase Agreement
("PPA").
The Company is pleased to report that approximately GBP31.4
million has been collected from TANGEDCO in FY18, including GBP19.3
million of TANGEDCO receivables outstanding as at 31 March 2017.
Since 1(st) April 2018 the Company has collected GBP2 million of
TANGEDCO receivables outstanding as at 31 March 2017, with GBP2.9
million of pending TANGEDCO receivables are expected to be
collected in FY 19.
All scheduled interest and principal repayments at Chennai,
amounting in aggregate to Rs2.9 billion (GBP33.8 million) were made
during the twelve months ended 31 March 2018.
Gujarat - 23% more units generated in FY18
Gujarat 300 MW Twelve months ended
31st Mar 18 (FY18)
--------------------
Total Generation (MUe) 2,041
--------------------
Average Tariff (Rs/kWh) 4.19
--------------------
Clean Dark Spreads (Rs/kWh) 1.03
--------------------
Net Debt (GBP, million (at 90.8
INR/GBP FX rate)) 193
--------------------
The Gujarat plant's generation was up 23% from FY17 to 2.0
billion units. The plant continued to stabilise production of power
by achieving a 78% PLF for the year in its second full year of
operation, up from 63% a year earlier and on track to rise to 80%
in FY19. The plant achieved a record 238 days of continued
operations without any outages in FY18.
The plant realised an average tariff of approximately Rs4.19 per
unit for FY18 and we expect an average tariff of approximately
Rs4.30 in FY19 on account of the addition of new customers at
higher tariff.
The "Clean Dark Spread" was Rs1.03 per kWh for Gujarat in FY18
(FY17: Rs1.37) or GBP12.00 (FY17: GBP15.70) on a GBP per MWh basis
in spite of the sharp increase in coal prices in FY18.
Interest and principal repayments totalling Rs1.7 billion
(GBP19.3) million have been made during the twelve months ended 31
March 2018 at Gujarat.
Strategic review of Gujarat plant; Sale of 5% equity interest in
OPGG
The Board has considered Management's achievements at Gujarat
since the project was conceptualised:
-- Building the 300 MW plant from scratch within a disciplined timeframe;
-- Constructing the plant sensitively, taking the initial
concerns of our community into account in our design, engineering
and our choice of technology;
-- Resolving issues relating to the completion of the delayed
transmission system to evacuate power from the plant;
-- Increasing production of the plant to reach our target of 80%
load factor, securing an attractive tariff from a diverse range of
group captive customers;
-- Actively engaged in constructive dialogue with the DISCOMs
and bankers agreeing and implementing debt rescheduling to preserve
cash; and,
-- DISCOMs have stopped levying cross-subsidies and have now
released approximately GBP13 million of FY18 CSS receivables to the
customers (out of GBP40 million of total CSS receivable) and
approximately GBP7 million of dues were already recovered from the
customers by OPGG.
With load factors at the plant performing in line with the best
in the industry, withheld cross subsidies starting to come through
and a strong and diverse customer group having been established,
the Board considers that the OPG team has achieved much with this
plant. OPGG is now operating under the group captive model on a
standalone basis.
With the Gujarat DISCOMs having commenced the release of the
delayed Cross Subsidy Surcharges ("CSS"), the Board has decided to
conduct a review of strategic options at Gujarat. The Board's
strategic review will occur alongside but separately to the
development of a lender-assisted Resolution Plan ("RP") as per the
RBI's circular dated 12 February 2018 setting out a revised
framework to reschedule the terms of OPGG term loans. These were
described in the Company's statement of 13th March 2018. The
circumstances leading to the requirement to develop an RP were due
to the accumulated impact of delayed recognition of captive power
status and the withholding of the CSS.
One of the potential outcomes of the RP could be that the banks
convert part of their debt into equity in OPGG and thereby further
reduce the Company's ownership of OPGG. Due to the CSS matters at
OPGG and the RP, a payment of GBP5.5 million of term loans in
respect of the quarter ended 31 March 2018 is outstanding.
The Board's strategy is to maximise robust cash flows and to
this end, the Group has sold a 5% per cent equity stake in its
special purpose vehicle OPGG to a local firm, Bee Electric Power
Private Limited ("Bee Electric"), that has already assisted OPGG in
resolving several issues raised by the DISCOMS and will continue to
assist OPGG in its dealings with DISCOMS, captive consumers and
regulators. The 5% equity interest in OPGG will provide long-term
incentives for Bee Electric and will better align its interests
with those of OPGG. The Group retains the ability to buyback the 5%
shareholding at fair value in the future. This transaction reduces
the Group's equity interest in OPGG to 46% and does not impact the
Group Captive status of the OPGG plant. The Group does not expect
any cash flow or dividends from OPGG in the medium term.
OPGG's loss was GBP13.4 million in FY17 and GBP9.3 million in H1
FY18. OPGG's net assets value was GBP25.1 million as at 31 March
2017 as per audited OPG Group's Consolidated FY17 Financial
Statements and GBP14.4 million as at 30 September 2017 as per
unaudited OPG Group's Consolidated H1 FY18 Financial Statements.
Sales proceeds from selling a 5% equity interest in OPGG of
approximately GBP4,400, being the nominal value of the shares sold
and being tax neutral for the Group. The proceeds will be used for
the Group's general corporate activities. Further announcements
will be made following the conclusion of the strategic review of
the OPGG operations.
Coal and Freight costs
The average landed coal price was Rs4,424 per tonne in FY18
(FY17: Rs3,552 per tonne). Following the coal price spike in 2017,
coal prices have been weakening since March 2018. Independent
expectations are for international coal prices to reduce further in
FY 2019 and beyond.
As previously reported, the Company has booked forward around
half of its freight requirement for the calendar 2018 year at fixed
prices.
62 MW Karnataka solar projects commissioned
The Company is pleased to announce that its four solar projects
at Karnataka, which will deliver 62MW, have been commissioned and
are being ramped up and are expected to contribute to the Group's
earnings in the current year.
Macro trends
Economy
India's gross domestic product is expected to reach US$ 6
trillion by FY27 and India is expected to be the third largest
consumer economy as its consumption is predicted by some to triple
to US$ 4 trillion by 2025, owing to shift in consumer behavior and
expenditure pattern.
With inflation expectations adjusting down, many commentators
suggest there could be room for further cuts in interest rates if
inflation durably remains below 4%. FY18 annual in inflation rate
was 4.36%.
India's GDP grew by 6.6 per cent in FY18 and is projected to
strengthen to above 7% in FY19, gradually recovering from the
transitory adverse impact of rolling out the Goods and Services
Tax. In the longer run, it is expected that GST will boost
corporate investment, productivity and growth by creating a single
market and reducing the cost of capital equipment.
Power Sector
With electricity production of 1,201.54 BU in India in FY18,
India is the third largest producer and consumer of power in the
world and the government's goal is to meet the anticipated growth
in demand by doubling the current capacity to provide 24x7
electricity to all users. Multiple drivers such as industrial
expansion and growing per - capita incomes are leading to that
growth demand which is set to continue in the coming years as India
seeks to become a global manufacturing hub. India is planning to
achieve 40 per cent of its energy output from non-fossil fuel
sources by 2030, thereby raising renewable energy installed
capacity from 57 GW to 175 GW by 2022. However, the 2015
International Energy Agency's special report forecasts that in 2040
coal-fired power plants will remain the backbone of India's power
system.
Outlook
The Board's priority is to ensure that the Group remains focused
on making robust returns and maximizing cash flows. To that end,
our new solar capacity is expected to generate steady revenues. Our
consistently strong performance at OPG's Chennai operations,
improvement in tariffs and, expected reduction in coal prices,
provide a further credible backdrop for a recovery in the Company's
profitability during FY19.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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